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The U.S. central bank will meet on Tuesday and experts expect it to agree to cut its benchmark federal funds rate by at least a quarter percentage point to help markets hobbled by a credit crunch.

"If the Fed (Federal Reserve) cuts rates this week the macroeconomic view could be seen as improving for energies, especially if the dollar remains under pressure," said Mike Fitzpatrick of MF Global.

Dollar-denominated commodities tend to strengthen when the dollar weakens against other currencies.

Oil was also receiving support Monday from fresh concerns over Iran's nuclear program.

France's foreign minister, Bernard Kouchner, increased pressure on Tehran on Sunday, saying France had to prepare for the prospect of war with Iran. Iran has called the comments provocative.

Oil's gains Monday were limited somewhat as Ingrid, the ninth named storm of the 2007 Atlantic hurricane season, was downgraded to a tropical depression.

Three refineries in Texas, shut by the previous Gulf of Mexico storm, Humberto, were working to restore operations.

(Additional reporting by Santosh Menon and Peg Mackey in London)